Dwolla to compete with Paypal – fee comparison

It is difficult to break the huge base that Paypal has built over the last two decades. I still remember, sometimes in 1999, paypal was offering $5 to your account just to sign up. True, they discouraged persons from getting the $5 in their account by asking them to send the proof of address, bank information and so on and so forth. But in any case Paypal is one of the most successful stories in the internet arena.

A number of payers are now attempting to break paypal monopoly with lower fee and better services. Dwolla is the newest entrant in the online money transaction. The only fee that Dwolla charges is the when the recipient receives the money and that too at $0.25

Paypal on the other hand charges a minimum transaction fee of $0.30 in addition to 2.90% fee. The table below shows the transaction fee when the transaction value is $10

Table : Paypal Vs Dwolla fee comparison

Fee

Paypal

Dwolla

Amount

$10

$10

% Fee

2.90%

0.00

Transaction Fee

$0.30

$0.25

Total Fee

$0.59

$0.25

Well, for a smaller transaction like $10, paypal will charge $0.59 while dwolla will charge $0.25. Well dwolla is better, at least for now. The absolute difference is not substantially different. However, if you consider somewhat higher amount, the advantage of dwolla starts becoming apparent. Look at the table below.

Table : Paypal Vs Dwolla fee comparison

Fee

Paypal

Dwolla

Amount

$100

$100

% Fee

2.90%

0.00

Transaction Fee

$0.30

$0.25

Total Fee

$3.40

$0.25

Well it is $3.40 Vs $0.25 – Dwolla is hard to be ignored with the significant saving it offers in higher value transaction.

Dwolla had receive $1M of funding in November 2010. Headed by Ben Milne, the Des Moines based company is backed by Veridian Group of Waterloo and The Members Group (TMG) of Des Moines. Dwolla had earlier raised $250K in Angel funding in November 2009.

StarredReviews believes that dwolla will give a serious challenge to break the monopoly of Paypal. We expect the valuation of company to rise to at least $20 million in the next two to three years.